Microsoft Beyond the Numbers

I was fascinated to see that Microsoft this week provided some cold, hard data aimed at refuting recent sentiments in the tech press that the software giant is somehow no longer a driving force in the technology arena. The figures, provided in a post to the Official Microsoft Blog, follow recent news that the company's latest OS release, Windows 7, had just passed the 150-million-licenses-sold mark.

"We live in a hyper-competitive industry, with loads of challenges to go along with loads of opportunity," Microsoft Corporate Vice President Frank Shaw wrote. "All the same, with Windows 7, Office 2010, Bing, Xbox 360, Kinect, Windows Phone 7, our cloud platform, and many other products, services, and happy customers, 2010 is shaping up as a huge year for us."

Shaw never mentions Apple or Google, but it's pretty clear that he has these companies in mind, since they're generally the companies that many people assume are beating Microsoft in various ways. The Windows 7 sales figure, for example, amounts to 600,000 units sold per day. Meanwhile, Apple's latest hypetastic product, the iPad, sells one third that number each week. And yet, every time the iPad sells another million units, Apple issues a press release and the compliant press corps promote it for them.

Why is this important? Apple and its CEO Steve Jobs are carefully promoting the iPad as the product that is ushering in the so-called post-PC era. But the facts refute this notion: PC makers are on track to sell more than 350 million PCs this year, and they collectively sell one million PCs every single day. Microsoft sells one million copies of Windows 7 each day and a half. But it takes Apple five weeks or so to sell just one million iPads. Sure, it's a successful business, but it's not replacing the PC. Not that most people in the press would ever pause to consider dulling down an Apple promotional story with such inconvenient details.

Even the lowly netbook will outsell the iPad dramatically in 2010. Shaw points to an estimate of 7.1 million iPad sales for this year, though the figure could end being as high as 8.5 million units. But PC makers are projected to sell 58 million netbooks in 2010. These figures refute other recent claims—baseless, but highly promoted—that the iPad was somehow eating into netbook sales and would one day replace the netbook. As it turns out, netbook sales—like PC sales overall—are actually growing pretty dramatically this year, iPad or not. And another bubble bursts.

Shaw even addresses Microsoft's lack of an iPad-like slate computing device solution—a fact that many industry observers have used to prove that the software giant is doomed because it doesn't foresee market trends. Noting correctly that Windows was on less than 10 percent of netbooks when that market began just four years ago, he also explains that Windows now dominates this market, shipping on 96 percent of netbook computers today. The message is clear: Windows might not have a major presence in the iPad's new market now, but there's no reason to think it can't relegate the Apple entry to niche status in the future. After all, they did it to the Mac, which is still mired with sub-4 percent market share in the PC market.

You have, no doubt, heard the hype about Google's Gmail and Google Apps somehow running away with the cloud computing market. Then you'll be surprised to discover that Microsoft's Hotmail service has 360 million active users, compared with just 173 million for Gmail and 284 million for Yahoo! Mail. There are also almost 300 million active Windows Live Messenger accounts worldwide, making Microsoft's IM offering—not Yahoo!'s or Google's—the number-one IM service.

Want to talk financials? After all, Apple just exceeded Microsoft's market cap. But Apple's net income of $5.7 billion for its last fiscal year is lower than the $6.5 billion Google earned, and well under the $14.5 billion Microsoft earned. That's right: Microsoft's net income is almost three times as high as Apple's.

There are other interesting numbers. Although only 16 million people subscribe to the 25 largest newspapers in the United States, 25 million people subscribe to Xbox Live. (Note: Many of them aren't paying customers, however.) The company's Bing search service got 21.4 million new users in its first year on the market. Linux market share in the server market fell from 24 percent in 2005 to 21.2 percent by the end of 2009, despite predictions that it would exceed 33 percent market share by that time. And while the Apple sold 8.8 million iPhones in the first quarter of 2010, smartphone leader Nokia sold 21.5 million smartphones then, and there were 55 million total smartphones sold in the same time period. With global smart phone sales expected to hit 439 million units in 2014, there's plenty of room for growth for everybody. Including, yes, Microsoft's late-to-the-party Windows Phone entry.

Shaw doesn't explicitly argue these points; he just provides the numbers. But these are the arguments I've been making in the face of an increasingly antagonistic crowd who are simply convinced that Microsoft is doomed, facts be damned. Microsoft doesn't often move as quickly or aggressively as I'd like—a decade of antitrust investigations will do that—but it is most definitely still a force to be reckoned with. Yes, there are examples of markets in which Microsoft has yet to make much headway (its Zune platform has never made a dent in the iTunes juggernaught), but the company continues to plug away and, bucking conventional wisdom, even innovate in ways its competitors don't.

The numbers do blow away all the hype. Its not 'magical'or 'revolutionary, its pure hard graft by a company that is getting better all the time. Vista probably did Microsoft a lot of good in the long run. It made them think again and take a new methodical approach to their issues. I get the impression Microsoft are on the up, and good for them too.

There are no general put downs of the competition here No derisive comments. Just the statement of facts, clear and to the point, quite refreshing that.

I see no harm in being negative about Apple, we ain't all been drinking the koolade. Microsoft can take it, why can't they?

When my Nokia's contract is due for renewal next year I will probably go for a Windows phone, simply on the basis of what I have seen of recent Microsoft products. An Iphone, nah, too much negativity in that camp I just wouldn't like the reception I would get.

You still are using two different ways to count sales. Why is it that you insist on using the presell date to count ipad sales and the launch date for Windows 7 sales?

Is it that hard to be consistent?

Windows 7 presells began on 6/26/09, meaning it took 362 days to reach 150M sales. That means they are selling 414K per day, not 614K. Counting from the launch date of 10/22/09 gives you the higher figure.

Or if you want to count that way, then do the same for the ipad. That means it took 80 days to sell 3M ipads, which works out to 37.5K per day, or 262K per week, not 200K.

And it took Apple only 3 weeks to sell that last 1M ipads. Which means they are selling faster and faster. You fail to account for that in any article you mention sales, yet leap all over it for Window 7 sales which are also accelerating.

Either way you count, both products are doing extremely well. But your lack of a consistent method of counting really shows your poor objectivity and tendency to spin Apple in a negative light, while doing the opposite for Microsoft.

Methinks Microsoft doth protest too much. The fact that they need to assert their continued relevance is proof that it is in decline.

Not that Microsoft is going way. Not that they are on the ropes, or not making huge profits. Not that they don't have large, secure, lucrative markets. They do. They absolutely dominate desktop OS and Office. But....

Aside from these legacy lockins achieved before the DOJ and the EU took action, Microsoft basically doesn't make any money in anything that they've tried, and most of what they've tried outside those two old core areas has been a big loser for them.

The second thing is that, having passed Microsoft's valuation (Apple is now worth more than Microsoft and Dell COMBINED; my how times have changed), Apple is now on a fast track to pass Microsoft in profitability real soon now.

However long it takes, Microsoft is under threat on multiple fronts. The phone market involves sales that dwarf the PC market---more phones are sold every year than the entire INSTALLED BASE of PCs---and Microsoft is in a struggle to hold 4th place in that market.

So, Microsoft is secure in 20 year-old market segments. They have big problems in the fastest growing and most profitable markets, and those are some cold hard numbers that Microsoft and Paul conveniently want you to ignore.

Microsoft's problem is that it's predictable and boring. Whenever Microsoft releases something 'new', its usually a rip off from someone else, or a response to a threat from somewhere. I cannot think of one instance where they have been truly innovative. The company is derivative, directionless and clueless. Yeah the sales figures for Win 7 are huge, but Microsoft are not preparing for the future in any innovative way. I'm sure typewriter makers scoffed at new fangled word processors, when their sales were huge too.

The numbers may show MS is doing fine, but if they are perceived to be weakening, that's what really matters to rivals & the public at large. Microsoft clearly is not self-destructing, but may eventually succumb to death by 1000 cuts.

"Just the statement of facts, clear and to the point, quite refreshing that."

No, the facts are getting skewed.

Read my earlier post.

Paul uses two different methods to calculate average sales. One method yields a larger number and one a smaller number. He uses the method which yields a larger number for Windows 7 and the method which yields a smaller number for the ipad. Then compares them. He should be using the same method for both. That is intentionally skewing the facts.